Culture, institutions and economic growth

Marion Payen () and Patrick Rondé
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Marion Payen: BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Patrick Rondé: BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: Are culture and institutions complementary or substitutable? Theoretically, Douglass North highlights that culture and institutions form an institutional matrix which ‘is characterized by […] complementarities'. This relationship of complementarity means that the institution's effect on economic performance would depend on culture. To test this complementarity hypothesis, we create new measures of culture and institutions and include their interaction term into an endogenous growth model. We use the Institutional Profiles Database and conduct a factor analysis to create good governance and degree of state intervention indicators to measure institutions. We measure culture by the grid and group dimensions of Mary Douglas's cultural theory and use the World Values Survey database to estimate them. Then, we show that for countries characterised by good governance, a marginal increase in culture will strongly affect growth, while the effect tends to zero for countries with bad institutional quality. Second, the marginal effect of an increase in the quality of institutions on growth will be stronger if the country is characterised by a ‘religion-centred' culture. So, our results support the complementarity hypothesis. Regarding policy-making, this result paves the way for institutional reforms more in line with people's cultural heritage.

Keywords: Informal institutions; Formal institutions; Economic growth; Complementarity (search for similar items in EconPapers)
Date: 2025-05-12
Note: View the original document on HAL open archive server: https://univoak.hal.science/hal-05777572v1
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Published in The World Economy, 2025, 48 (7), pp.1654 - 1678. ⟨10.1111/twec.13695⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05777572

DOI: 10.1111/twec.13695

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